Editorial: Congress must level playing field on Internet sales taxes

How many of you have entered a dollar amount on Line 36 of the Wisconsin income tax Form 1?

That's the line where you self-report "sales and use tax due on Internet, mail order, or other out-of-state purchases." In other words, if you've ever purchased something from Amazon, for example, you should have entered a dollar amount here when you filed your taxes.

But very few people do. About one of every 100 state taxpayers did when they filed their 2010 income taxes, according to a 2012 story by Steven Walters of WisconsinEye, a nonprofit public affairs channel.

Currently, all retailers in Wisconsin collect sales tax on purchases and pay that money to the state. If you buy something, the state and county sales taxes are part of what you pay.

If you purchase something online from a business that has a physical presence in Wisconsin, you pay sales tax. But if that business doesn't have a store or warehouse in Wisconsin, it doesn't charge a sales tax.

For example, if you went online and purchased a shirt from Lands' End, based in Wisconsin, you'd pay sales tax. If you purchased a similar shirt from L.L. Bean, based in Maine, you would not.

The loophole is courtesy of a 1992 U.S. Supreme Court decision that exempts companies from collecting sales tax from purchasers who live in a state where the business has no physical presence.

A bill that the Senate is expected to vote on Monday would change that. The Marketplace Fairness Act give states the ability to require online and mail order retailers to collect state and local sales tax based on the address of the purchaser.

Wisconsin retailers say this would level the playing field. In a meeting with Press-Gazette Media, area retailers said they don't have a problem competing against other businesses, as long as all play by the same rules and all charge a state sales tax.

Without that level playing field, area businesses find themselves answering a consumer's questions and concerns only to have that consumer order the same item online and not have to pay a sales tax. It reduces local businesses to showrooms. They do all the work; the online retailer collects the money.

What's at stake is millions of dollars as well as the fiscal health of the local community.

The state Department of Revenue estimates that Wisconsin lost $157 million in revenue because taxes were not collected on mail order and other remote sales in 2012 - $78 million of that from e-commerce sales.

Also, the health of area businesses is important. They pay taxes, provide jobs and donate to local charitable organizations yet lose sales and money when tax-free purchases are made. The out-of-state online-only retailers aren't invested in your community.

The bill before the Senate sets a threshold of $1 million in online sales so small businesses will not be hurt and calls for the state to provide free software so businesses can comply.

One aspect of the bill calls for the state to "establish a uniform sales tax base for use throughout the state." That concerns us because many counties, like Brown, have a 0.5 percent county sales tax. We wouldn't want to lose out on that money because the state must charge a uniform sales tax. And it's hard to believe that the software will not be able to determine the correct state and local sales taxes. The technology that has given us the ease of online shopping should also be able to clear that hurdle.

So far, the bill has bipartisan support in the Senate, but faces a much more unclear fate in the House.

However, Congress needs to pass this bill. Local businesses are willing to compete as long as it's a fair fight. Also, the bill is not asking for a new tax; it's asking that the existing tax is applied fairly and uniformly and doesn't put the burden on the consumer to reimburse the state. That's not too much to ask.

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Editorial: Congress must level playing field on Internet sales taxes

How many of you have entered a dollar amount on Line 36 of the Wisconsin income tax Form 1?

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